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SLM Corp (SLM)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered a clean beat versus Wall Street on both EPS and revenue: GAAP diluted EPS was $1.40 versus $1.18 consensus, and “revenue” (SPGI net revenue definition) was $557.7M versus $360.5M consensus; management reaffirmed full‑year 2025 guidance rather than raise it, noting the quarter’s large loan‑sale gain was anticipated when guidance was set * *.
  • Net interest margin expanded 35 bps sequentially to 5.27% as deposit costs eased and mix helped; non‑interest income was buoyed by a $188M gain on a $2.0B loan sale (high single‑digit premium) .
  • Credit trends improved ahead of plan: annualized net charge‑offs were 1.88% (down 26 bps YoY), 30+ DPD delinquency was 3.58% (vs. 3.68% at YE’24), and hardship forbearance remained stable at 0.92% .
  • Capital return remains active but paced to loan sale proceeds: $31M of buybacks (1.0M shares) in Q1; $372M remains under the 2024 program; CET1 11.6% and Total RBC 12.9% provide capacity; Q2 common dividend declared at $0.13 per share .
  • Near‑term stock catalysts: sustained NIM improvement, additional loan sale timing/pricing, and confirmation that loss‑mitigation/extended‑grace programs keep delinquency and NCOs on the favorable trajectory discussed on the call .

What Went Well and What Went Wrong

  • What Went Well

    • Strong gain‑on‑sale execution: $2.0B loan sale generated $188M gains (up $45M YoY; high single‑digit premium), materially lifting non‑interest income and EPS .
    • Credit outperformed: net charge‑offs at 1.88% (down 26 bps YoY), with management attributing improvement to seasonality, optimized loss‑mitigation, and underwriting enhancements; 30+ DPD improved sequentially to 3.6% of loans in repayment .
    • NIM inflected: 5.27% in Q1 (up 35 bps QoQ), with CFO reiterating a long‑term NIM target in the low‑to‑mid‑5% range .

  • What Went Wrong

    • Provision rose YoY to $23M (from $12M), driven by growth in commitments; though partially offset by a $116M reserve release tied to the sale (non‑recurring) .
    • Delinquencies up modestly YoY (3.58% vs. 3.41% in Q1’24), with early‑stage buckets influenced by customers in qualifying periods of modification programs (management-adjusted view ~3.0%) .
    • Guidance not raised despite a sizable beat; management cited that the February loan‑sale gains were embedded when they issued the 2025 outlook and maintained a cautious macro stance .

Financial Results

Q1 2025 vs S&P Global Consensus

MetricConsensus (S&P Global)*ActualSurprise
Diluted EPS ($)1.1815*1.40 Beat
Revenue — SPGI net revenue definition ($M)360.46*557.73*Beat

Values retrieved from S&P Global.

Income Statement (GAAP)

MetricQ1 2024Q4 2024Q1 2025
Net interest income ($M)387.02 362.19 374.97
Provision for credit losses ($M)12.04 108.18 23.29
Net interest income after provision ($M)374.98 254.01 351.68
Total non‑interest income ($M)174.16 27.78 206.04
Total non‑interest expenses ($M)161.65 149.63 154.61
Net income attributable to common ($M)285.28 107.19 300.58
Diluted EPS ($)1.27 0.50 1.40

Margins and Yields

MetricQ1 2024Q4 2024Q1 2025
Net interest margin (%)5.49% 4.92% 5.27%
Yield — Total interest‑earning assets (%)9.41% 8.98% 9.22%
Yield — Private Education Loans (%)11.01% 10.54% 10.59%
Cost of funds (%)4.18% 4.31% 4.23%

Selected KPIs and Credit

KPIQ1 2024Q4 2024Q1 2025
Private Education Loan sales ($M)2,103 — 2,003
Gains on sales of loans ($M)143.04 (0.009) 187.73
Net charge‑offs (% of avg loans in repayment, annualized)2.14% 2.38% 1.88%
Delinquencies (% of loans in repayment)3.41% 3.70% 3.58%
Hardship forbearance (% of loans in repayment + forbearance)1.00% 0.92% 0.92%
Non‑interest expenses ($M)161.65 150.00 154.61
Common dividend per share ($)0.11 0.13 0.13 (Q2’25 declared)

Operational datapoints from call

ItemQ1 2024Q1 2025
Private Education Loan originations ($B)—2.8 (+7.3% YoY)
Avg FICO at approval748 753
Cosigner rate (%)91% 93%

Guidance Changes

MetricPeriodPrevious Guidance (Q4’24)Current Guidance (Q1’25)Change
GAAP Diluted EPSFY 2025$3.00 – $3.10 $3.00 – $3.10 Maintained
Private Education Loan originations (YoY growth)FY 20256% – 8% 6% – 8% Maintained
Total loan portfolio net charge‑offs (% of avg loans in repayment)FY 20252.0% – 2.2% 2.0% – 2.2% Maintained
Non‑interest expenses ($M)FY 2025$655 – $675 $655 – $675 Maintained
Dividend (common)Ongoing$0.13 per quarter (Q4’24) Q2’25 declared $0.13 Maintained

Management explicitly reaffirmed all key 2025 metrics and maintained a cautious macro stance .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24 and Q4’24)Current Period (Q1’25)Trend
Credit/loss mitigationNCOs 2.08% in Q3’24; significant provision tied to commitments; hardship forbearance improved; updated guidance contemplated normalization . Q4’24 NCOs 2.38%, delinquencies 3.7% at YE’24 .NCOs 1.88% (down 26 bps YoY) with seasonal tailwinds and ongoing benefits from optimized loss‑mitigation; early‑stage delinquencies influenced by borrowers in mod qualification periods .Improving
NIM/Deposit costsQ3’24 NIM 5.00% amid higher funding costs . Q4’24 NIM 4.92% .NIM 5.27% (up 35 bps QoQ); longer‑term target low‑to‑mid‑5% reiterated .Improving
Loan sales and marketNo loan sale in Q3; Q4 had immaterial loss on sale; market functioning .$2.0B sale, $188M gain; market stable; next sale timing opportunistic; buyer expected to use SLM securitization framework .Positive execution
Originations/share gainsQ3’24 originations +13% YoY; share gains; FY24 guide increased .Q1’25 originations $2.8B (+7.3% YoY), spring effect smaller than fall; full‑year growth aligned with 6–8% guide .Sustained, normalizing
Policy/macro (federal programs, job market)Ongoing regulatory focus; macro uncertainty acknowledged .Management sees limited impact from federal collections resumption on SLM borrowers so far; joint customers show lower federal delinquency and 85% stay current on SLM loans; grad job market monitored; extended‑grace usage seen as constructive .Watchful but stable
Capital return/capitalRebased dividend to $0.13; buybacks programmatic and tied to loan sale proceeds .$31M buybacks; $372M capacity remaining; CET1 11.6%, TRBC 12.9%; “moderate, predictable” balance sheet growth with ongoing buybacks/dividend .Ongoing

Management Commentary

  • Strategy and tone: “We’re off to a strong start in 2025… seeing stable credit performance with positive trends… positioned to deliver results in line with our guidance for the year.” — CEO Jonathan Witter .
  • Guidance stance: “At this time, we are reaffirming the 2025 guidance that we shared on our last earnings call for all key metrics.” — CEO .
  • NIM and provisions detail: “NIM was 5.27% for the quarter, 35 bps ahead of the prior quarter… provision was $23M… largely driven by loan growth… partially offset by $116M reserve release associated with the $2B loan sale.” — CFO Pete Graham .
  • Capital return approach: “We expect to continue to programmatically and strategically buy back stock throughout the year.” — CEO .
  • Balance sheet growth philosophy: Pursuing “moderate, accelerating and predictable balance sheet growth” to balance NIM earnings with capital return capacity (buybacks funded by loan sales; potential for a strong and, over time, growing dividend) — CEO .

Q&A Highlights

  • Credit drivers and policy impacts: Charge‑off improvement reflects seasonality, optimized loss‑mitigation, and underwriting; early data show limited negative spillover from federal collections resumption among SLM borrowers; 85% of joint customers delinquent on federal loans remain current on SLM loans .
  • Delinquency mix: Early‑stage delinquency elevated by borrowers in modification qualifying periods; adjusting for this, portfolio delinquency was ~3% in the quarter .
  • Guidance discipline: Despite an EPS beat vs consensus, management held FY25 guidance, noting the February loan‑sale contribution was known when the outlook was set, with macro caution maintained .
  • Buybacks pacing: $31M in Q1 consistent with a programmatic approach funded by loan sale proceeds; cadence expected to echo 2024 patterns .
  • Originations trajectory: Spring “follow‑on” effect appropriately smaller than fall; FY25 originations growth tracking to plan; don’t expect another competitor exit‑driven step‑up this fall .
  • Market color: Student loan ABS markets functioning; spreads volatile but not persistently wider; next sale timing to be opportunistic .

Estimates Context

  • Q1 2025 results vs S&P Global consensus: EPS $1.40 vs $1.1815*; SPGI “revenue” $557.73M* vs $360.46M*; both beats. Management did not raise FY25 guidance given that the quarter’s loan‑sale gain was embedded when the outlook was issued and due to macro uncertainty * *.
  • Forward look: Street models may re‑allocate the better‑than‑expected Q1 gain‑on‑sale into timing (front‑loaded) while monitoring NIM trajectory and credit normalization; full‑year ranges likely require evidence of additional loan sale activity and sustained NIM/credit trends to justify upward bias .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Core earnings power improved: NIM expanded to 5.27% and expenses remained controlled, supporting operating leverage heading into peak season .
  • Loan‑sale execution is a swing factor for non‑interest income and capital return; Q1’s $188M gain underscores demand and pricing resilience; watch for timing of the next sale .
  • Credit is trending better than feared: NCOs at 1.88% and stable hardship forbearance (0.92%); early buckets reflect mod program mechanics rather than broad deterioration .
  • Guidance reaffirmation signals confidence but prudence; the Q1 beat alone isn’t enough to push FY25 ranges higher given known loan‑sale timing and macro watch‑items .
  • Capital return capacity remains meaningful: $372M buyback authorization left and strong capital ratios (CET1 11.6%, TRBC 12.9%) alongside a steady $0.13 dividend .
  • Originations quality remains strong (avg FICO 753; 93% cosigner rate) and spring volumes (+7.3% YoY) track to the 6–8% FY growth guide .
  • Monitor: ABS market tone, deposit pricing, regulatory developments in federal programs, and evidence that loss‑mitigation outcomes continue to hold as repayment cohorts season .

Notes:

  • SPGI “Revenue” reflects net interest income after provision plus non‑interest income (per reconciliation to reported actuals). Values marked with an asterisk (*) were retrieved from S&P Global.
  • All other figures are GAAP as reported in SLM’s 8‑K/press materials and earnings call.